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Vietnam’s Path to an Innovation-Driven Economy

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Vietnam is on the cusp of a transformative leap into an innovation-driven economy, as it prepares to enact a new decree aimed at fostering its burgeoning start-up ecosystem amidst digital transformation and sustainable development goals.

Deputy Minister of Science and Technology Hoang Minh emphasised Vietnam’s vibrant start-up landscape, powered by a new generation of entrepreneurs heavily invested in sci-tech. Yet, he underscored the need for a robust legal framework tailored specifically to support innovative start-ups, distinct from traditional small- and medium-sized enterprises (SMEs), which currently share regulatory guidelines despite their differing developmental trajectories and operational needs.

The forthcoming decree dedicated to innovation and innovative start-ups is poised to elevate Vietnam’s innovation sector to new heights. It aims to streamline definitions, clarify support structures for innovation centres, and provide targeted policies that nurture the unique requirements of start-ups, thereby optimising their growth potential.

Highlighting the momentum in Vietnam’s start-up ecosystem, the Ministry of Science and Technology reported two significant investment waves since the early 2000s, culminating in a record US$ 1.4 billion inflow in 2021. Although global uncertainties due to the pandemic led to a slight decline in venture capital to $634 million in 2022 and US$ 529 million in 2023, Vietnam maintained its global standing, buoyed by advancements recognised in the World Intellectual Property Organisation’s Global Innovation Index.

At the Vietnam Innovation Forum 2024, it was revealed that Vietnam continues to rank third in Southeast Asia for both the number of investment deals and total investment in start-ups. With over 3,000 start-ups and more than 140 universities and research institutions actively engaged in innovation, Vietnam is poised to leverage its strengths in fostering a conducive environment for entrepreneurial growth.

Post-pandemic, there has been a concerted effort to enhance the legal framework supporting innovation and start-ups, essential for integrating into the global economy. This includes provisions for start-up support funds and initiatives to ensure a transparent and secure business environment conducive to rapid growth.

Vietnam’s decision-making frameworks are set against the backdrop of Decision No. 569/QD-TTg, focusing on science, technology, and innovation development until 2030 as a strategic national priority. These sectors are pivotal in enhancing national competitiveness and driving productivity, quality, and efficiency gains essential for sustainable economic growth amid ongoing digital transformations.

Trinh Thi Huong from the Ministry of Planning and Investment highlighted the need for broader digital transformation across Vietnam’s business landscape, noting that most enterprises are yet to fully embrace innovation’s transformative potential. With research and development (R&D) investments still modest at 0.4% of GDP compared to regional peers like Thailand and Singapore, there is a clear imperative to ramp up efforts in this critical area.

Vo Tri Thanh from the Institute for Brand and Competitiveness Strategy stressed the urgency of embracing innovation, digital transformation, and green initiatives, stating that Vietnam must seize these opportunities to secure its future economic trajectory. He emphasised the necessity of a robust legal framework to support these efforts effectively.

Addressing fragmentation in current policies, Nguyen Thy Nga of the Institute for Policy Management and Development Strategy advocated for streamlined approaches to digital transformation and innovation, ensuring cohesive support mechanisms accessible to businesses navigating complex regulatory landscapes.

Looking ahead, Deputy Director of the National Innovation Centre Do Tien Thinh proposed pilot mechanisms to accelerate innovation in key sectors such as carbon credit exchange, alongside innovative funding solutions like revamped venture capital frameworks and crowdfunding initiatives. Thinh stressed the importance of aligning innovation strategies with global and domestic trends to harness Vietnam’s unique strengths effectively.

As Vietnam prepares to implement its new decree, the stage is set for a dynamic shift towards fostering an innovation-driven economy, propelled by a supportive legal framework, strategic investments, and collaborative efforts across sectors. With innovation at its core, Vietnam is poised to chart a course towards sustained growth, resilience, and global leadership in the digital era.

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